Economics

Abstract

Water is a critical element of global economic activity and its supply and distribution involves enormous ongoing capital investment and operations and maintenance costs. The use of water is also subject to market forces. Water has a value, which varies depending on its scarcity, its production, treatment, and transportation costs, and the value of crops and other goods produced through its use. Water also has aesthetic, recreational, and environmental values. The demand for water, beyond that needed for basic human survival, is elastic in that cost influences the amount used (Fig. 34.1). There is little question concerning the correlation between the rate of water use and the price paid by users (if any). Any meaningful discussion of water management, therefore, cannot ignore economic issues associated with the development and use of water resources. Fig. 34.1Example of an elastic demand curve (blue) in which the quantity of an item consumed decreases with increasing price. Where demand is perfectly inelastic (red curve) the quantity of an item consumed is independent of price. On a household level, the demand curve for water tends to resemble the green curve in that the demand for water to meet basic potable needs is inelastic, but more elastic after basic needs are met